The Obama administration is making a new push to crack down on for-profit colleges, saying Thursday that it would stop the flow of taxpayer dollars to schools that don't properly prepare students for the job market.
“Higher education should open up doors of opportunity, but students in these low-performing programs often end up worse off than before they enrolled: saddled by debt and with few - if any - options for a career,” Education Secretary Arne Duncan said. “The proposed regulations address growing concerns about unaffordable levels of loan debt for students enrolled in these programs by targeting the lowest-performing schools, while shining a light on best practices and giving all programs an opportunity to improve.”
Under the new rules, for-profit colleges must show that loan payments for average graduates don't surpass 20 percent of their discretionary earnings or 8 percent of their total earnings — and the default rate for previous students can’t exceed 30 percent.
White House officials noted that roughly 22 percent of students with loans at for-profit colleges defaulted within three years, compared to 13 percent of those at public colleges.
The new regulations also call for more transparency, as for-profit colleges will be required to provide details about program costs and the ability of their students to obtain jobs.
Duncan said the administration is aiming to have the new standards published by the end of 2016.
Because taxpayer funding accounts for such a higher percentage of dollars invested in such schools, these rules could effectively shutter those that don’t meet the administration’s standards.
“We really don’t know how many programs will be eliminated going forward,” Duncan admitted in a conference call, previewing the initiative for reporters.
Obama pushed a similar proposal in his first term but a federal judge who called the measures “arbitrary and capricious” squashed the blueprint.
Duncan, however, said officials adjusted the ratio of debt versus earnings to withstand another likely court challenge.
This story was first published on March 13 at 10:43 p.m.